KEY POINTS
- The World Bank reduced its 2024 growth forecast for Sub-Saharan Africa due to the ongoing crisis in Sudan, signalling a significant concern for regional economic stability.
- Sudan’s economic struggles have been exacerbated by the recent conflict, which continues to hamper the nation’s GDP growth and recovery prospects.
- Sudan’s long-standing political instability and recent internal conflicts have further weakened the financial infrastructure, driving a slower economic progression.
The World Bank has recently reduced its growth expectation for Sub-Saharan Africa for the year 2024 due to the crisis in Sudan and this has exposed the vulnerability of the economies in this region. The civil unrest and political crisis in Sudan have affected the regional economy and slowed financial development; this would be disastrous for Sudan and the region at large. Sudan, which has had some potential for economic reforms since the 2019 coup, is now facing tremendous challenges that can hinder its development.
Economic progression in Sudan
As recently reported by Reuters, the dynamics of Sudan’s economic development will be described as a series of twists and turns rather than a straight line. After the secession of South Sudan in July 2011, which controls over seventy-five percent of Sudan’s oil resources, the economy of the country plummeted. Inflation rose to the roof, public debt went up and the government was left with no option except to balance the economy.
However, when the transitional government assumed power in 2019 there was an expectation that the results would improve. Attempts were made to deregulate the economy, to curb inflation, and to obtain foreign credits. Sudan signed a staff-monitored program with the IMF in 2020 and paid off arrears to the World Bank and the African Development Bank.
In 2021, Sudan was finally taken off the list of state sponsors of terrorism by the United States, it opened the door to Sudan to the international financial systems and attract foreign investments. The government also implemented structural adjustments, removed fuel subsidies, and embarked on market-determined exchange rate regime.
Impact of the conflict on economic growth
The present crisis in Sudan has forced people to flee, killed many, and damaged essential structures. People are locked down and most of the economic activities have come to a stand-still in many parts of the country markets, businesses, and trade routes. Sudan relies on agriculture as one of its leading economic activities, food production, and processing, and the conflict has impacted negatively on this sector.
Furthermore, the Sudanese banking sector is near failure, as the companies cannot obtain funds or even perform transactions. This has frightened investors away and brought the private sector which is the engine of employment and growth to its knees. These are realities that the World Bank recently captured when it decided to reduce the growth forecast for sub-Saharan Africa.
Comparative analysis: growth and reality
However, the current structural changes have not transformed the basic tendencies of the country’s economy. As the World Bank has pointed out the crisis in Sudan is a microcosm of the African continent: politics, lack of government, and institutions. All these factors are linked to the problem of the economy in the region.
For instance, although the inflation rate in Sudan has declined since its record high in 2021, it is still among the highest in the world. The exchange rate after being stabilized is now fluctuating, this time making imports very expensive. Gross public debt is rising, and the ongoing conflict has limited the nation’s borrowing capacity in the global credit markets.
The case with Sudan is not very different from that of other countries in Africa like Ethiopia where conflict has also retarded development. This shows how closely related governance, stability, and economic performance are in the region. In other words, no economic reform can be sustained if there is no political stability.
Prescribed solutions
To get back on its feet, several things need to happen for Sudan. First, political stability has to be reconstructed. To solve this problem, it is necessary to focus on the beginning of negotiations between warring parties. The economy can be managed and the reforms needed to bring about changes that will help to overcome the situation that we are currently in only be done under a stable government.
Second, the support and participation from the international sector are essential. Hence, the international community and organizations such as the World Bank and IMF must go on to further support Sudan through financial aid and technical support. But this support should only come with conditions that there must be a change of government to a civilian government that is willing to undertake economic reforms and governance.
Third, there is the need to diversify the economy. Sudan has for long depended on agriculture and natural resources, especially oil. In order to create buffers, the government needs to invest in other sectors for example manufacturing, technology, and services. It would also help to generate employment and, therefore, make the economy less sensitive to exogenous factors, including instability of global oil prices or adverse effects of climate change on agriculture.
Fourth, access to financial services, and capital should be a key focus. There is a need to enhance the capacities of the banking sector to support credit needed by SMEs that are the fabric of the economy. Financial inclusion would also help the rural people especially women to engage in economic activities.
Finally, transparency and accountability play a key role in restoring the confidence of the people in the government. Sudan has been plagued with corruption for many years and measures to fight it must be intensified. A government that has been open enough to be answerable to the citizens of the country will not only encourage foreign investors to invest in the country but also encourage the citizens to invest in their own country.
The current economic problem in Sudan has its origin in political insecurity and unrest. Sudan requires political stability, international support, diversification of the economy, financial inclusion, and good governance to get on the right footing for sustained economic development.
